I took a look at three stocks to avoid last week, predicting that fuboTV (FUBO 3.44%), Texas Roadhouse (TXRH 1.34%), and Dunkin' Brands (DNKN) were in for a rough few days. I fell short.
- FuboTV closed the week exactly where it started. I thought the fast-growing international sports streaming platform would be vulnerable after its recent surge. Taking advantage of its good fortune, fuboTV filed to sell 9.9 million shares at the end of the trading week, so I may have been a week early on this call.
- Texas Roadhouse declined 3%. The casual-steakhouse chain posted better-than-expected sales and earnings in its quarterly report. Comps did slip 6.5%, but the metric improved as the quarter played out, clocking in nearly flat for September.
- Dunkin' Brands moved 12% higher. My timing was lousy. I wrote last week's piece shortly because the doughnuts-and-coffee chain revealed that it had was in talks to be taken private in an $8.8 billion deal.
The three stocks averaged a 5% climb, a sharp contrast to the S&P's 5.6% decline for the week. I blew it, but let's see if I can get back on track.
For this week, I see 3D Systems (DDD 10.26%), ExxonMobil (XOM 1.70%), and The GEO Group (GEO 2.57%) as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
There was a time when 3D printing was all the rave, and 3D Systems was one of the niche's two market darlings. It's a cruel world these days. This will be the third year out of the past five that 3D Systems posts a revenue decline, and you have to go all the way back to 2014 to find the last time it came through with double-digit revenue growth.
3D Systems reports fresh financials on Friday morning, and it's not going to be pretty. Analysts see its loss per share doubling on a 26% revenue drop. Momentum isn't on 3D Systems' side. It posted a larger-than-expected deficit in its previous quarter.
My timing isn't ideal. 3D Systems plunged 26% last week, fueled initially by a negative analyst note -- and then the general market malaise did its worst. It could bounce back even if it's just a bad quarter instead of a terrible report. I still like my chances here, given the disappointing trend over the past few years of 3D printing failing to go mainstream.
There are a lot of reasons to be down on ExxonMobil these days. COVID-19 cases are spiking again worldwide, so we might face lockdowns in the future -- as we're seeing in Europe now -- absent a coronavirus vaccine. Your car doesn't get very thirsty when it's parked in front of your house most of the time.
Let's also talk about Tuesday. Most polls suggest that former Vice President Joe Biden will emerge victorious on Election Day, and he's made it clear that he wants to reduce the country's reliance on fossil fuels. With more incentives likely on the way to spur cleaner energy solutions, the already dimming prospects for ExxonMobil will get even dimmer.
A caveat is that ExxonMobil's 10.6% yield is going to prove magnetic if volatility is in the air this week. The payout isn't sustainable. Analysts don't see earnings covering its dividend until 2024, and -- spoiler alert -- the bottom line isn't likely to look as good as Wall Street thinks it will by then. ExxonMobil may hold up better than the general market if this past week's sell-off spills over into the new week, but it's also easy to see why investors will not want to own ExxonMobil if the election results play out as many expect.
The GEO Group
If you're looking for a stock that will fare fundamentally worse under a Biden presidency, it's hard to top The GEO Group. The operator of private prisons and other detention centers is going to be on borrowed time if Biden wins the White House.
The GEO Group commands an even larger yield than ExxonMobil, but it's also even less sustainable. It posted mixed financial results on Thursday. Revenue fell harder than expected, but funds from operations clocked in ahead of Wall Street targets. The GEO Group thinks it's been a victim of political rhetoric and a mischaracterization of its role as a government services provider. However, it hasn't been all that hot under President Trump either, with revenue growing by no more than 6% in any of the past four years.
If you're looking for safe stocks, you aren't likely to find them in 3D Systems, ExxonMobil, or The GEO Group this week.